Madan B.Lund, Coimbatore V. DCIT Corporate Circle 1, Coimbatore

ITA 3230/CHNY/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3531 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R ANITAJCIT
• Assessee Lawyers: K RAGHU
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Competent authority; Assessment record; Capital Gains
• Section: 143(3); 50C; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI , . , % BEFORE SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.3230/CHNY/2017 ( / ASSESSMENT YEAR: 2007-08) MR. MADAN B.LUND NO.108, SRIVARI TOWERS, RACE COURSE, COIMBATORE-641 018. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1 COIMBATORE. PAN:AAFPC6700M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.K.RAGHU, FCA /RESPONDENT BY : MS. R.ANITA,JCIT /DATE OF HEARING : 10.11.2020 /DATE OF PRONOUNCEMENT : 10.11.2020 / O R D E R PER G.MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -1, COIMBATORE DATED 31.10.2017 AND PERTAINS TO THE AS SESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE AO HAS EXCEEDED HIS/HER JURISDICTION U/S 147 OF THE IT .ACT, 1961, AND THEREFORE, NOTICE U/S 148 ISSUED ,AS NOT VALID , IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW. 2. THE LEARNED CITIA) OUGHT TO HAVE HELD THAT THE AO COULD NOT HAVE MADE THE ASSESSMENT BASED ON SECTION 50C OF THE IT.ACT, WITHOUT MAKING A REFERENCE TO THE VA LUATION OFFICER, CONTEMPLATED IN SECTION 50C(2) OF THE 1.T. ACT, FOR 2 ITA NO.3230/CHNY/2017 SUCH A REFERENCE, INSPITE OF REQUEST OF THE APPELLA NT, IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW. 3. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE IMPUGNED ORDER OF ASSESSMENT MADE BY THE AO WAS NOT VALID, N THE FACTS AND THE CIRCUMSTANCES OF THE CAS E AND IN LAW, AS NO INCOME HAS ESCAPED ASSESSMENT TO TAX, IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW. 4. FOR THESE AND OTHER ADDITIONAL GROUNDS OF APPEA L THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-,COIMBATORE, I S OPPOSED TO LAW AND UNSUSTAINABLE IN THE FACTS AND T HE CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 31.10.2007 DECLARING TOTAL INCOME OF ` 16,06,978/-. THE CASE HAS BEEN SUBSEQUENTLY REOPENED FOR THE REASONS RECORD ED, AS PER WHICH INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT ON ACCOUNT OF UNDER VALUATION OF SALE OF PROPERTY IN TERMS OF SECTION 50C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFER RED TO AS 'THE ACT') AND HENCE, NOTICE U/S.148 DATED 31.03.2014 WAS ISSUED. IN RESPONSE TO THE NOTICE, THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 22.04.2014. THE CASE HAS BEEN SELECTED FOR SCRUT INY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESS ING OFFICER NOTED THAT ASSESSEE HAS SOLD IMMOVABLE PROPERTY FOR CONSIDERATION OF ` 1,85,000/- , WHEREAS STAMP DUTY VALUE OF THE SAID PROPERTY WAS AT ` 6,96,000/-, AS PER STAMP DUTY AUTHORITIES AND A CCORDINGLY 3 ITA NO.3230/CHNY/2017 CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY DIFFE RENTIAL SALE CONSIDERATION SHALL NOT BE ADDED AS INCOME DERIVED FROM SALE OF PROPERTY UNDER THE HEAD LONG TERM CAPITAL GAINS. IN RESPONSE, THE ASSESSEE HAS OPPOSED REOPENING OF ASSESSMENT ON THE GROUND THAT NOTICE ISSUED U/S.148 DOES NOT SAY THAT IT WA S ISSUED WITH DUE APPROVAL OF THE COMPETENT AUTHORITY, AS REQUIRED U /S.151 OF THE ACT. THE ASSESSEE HAS ALSO CHALLENGED DIFFERENTIAL VALUE OF SALE CONSIDERATION ON THE GROUND THAT HE HAD ENTERED INT O AN AGREEMENT FOR PURCHASE OF THE PROPERTY IN THE YEAR 1997 AND P AID SUBSTANTIAL CONSIDERATION OF ` 1,35,000/- BY FIXING SALE VALUE OF THE PROPERTY A T ` 1,85,000/-, THEREFORE, VALUE AS ON DATE OF REGIST RATION OF PROPERTY, ALTHOUGH IT WAS MORE THAN THE AMOUNT STATED IN REG ISTERED DOCUMENT CANNOT BE CONSIDERED AS FAIR MARKET VALU E FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THE ASSES SING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION FURNISHED BY THE ASSESSEE , ACCORDINGLY HE WAS OF THE VIEW THAT ASSESSEE HAS UN DERSTATED THE SALE CONSIDERATION OF THE PROPERTY, WHICH IS EVIDE NT FROM THE FACT THAT AS PER REGISTRATION DEED GUIDELINE VALUE OF THE PROPERTY IS AT ` 6,96,000/- AND THEREFORE, OPINED THAT FOR THE PURPO SE OF COMPUTATION OF LONG TERM CAPITAL GAIN, FULL VALUE OF CONSIDERATION 4 ITA NO.3230/CHNY/2017 NEEDS TO BE TAKEN AS PER THE PROVISIONS OF SECTION 50C OF THE ACT AND ACCORDINGLY ADOPTED THE VALUE OF ` 6,96,000/- AND RECOMPUTED THE LONG TERM CAPITAL GAIN AND MADE ADDITION OF ` 5,11,000/- UNDER THE HEAD INCOME FROM CAPITAL GAIN. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE LEARNED CIT(A) . BEFORE THE LEARNED CIT(A), THE ASSESSEE HAS CHALLENGED REOPENING O F ASSESSMENT IN THE LIGHT OF CERTAIN JUDICIAL PRECEDENTS AND ARGUE D THAT REQUIREMENT OF SECTION 151(2) OF THE ACT WAS NOT COMPLIED WITH BEFORE ISSUE OF NOTICE U/S.148 OF THE ACT. THE ASSESSEE HAS ALSO CH ALLENGED THE FULL VALUE OF CONSIDERATION ADOPTED BY THE ASSESSING OF FICER, AS MANDATED IN SECTION 50C OF THE ACT. THE LEARNED C IT(A), AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSE E REJECTED THE LEGAL GROUNDS TAKEN BY THE ASSESSEE CHALLENGING VAL IDITY OF NOTICE U/S.148 OF THE ACT BY HOLDING THAT NECESSARY SANC TION AS ENVISAGED UNDER SECTION 151(2) OF THE ACT WAS TAKEN FROM THE COMPETENT AUTHORITY AND ALSO THE ASSESSING OFFICER HAD A RRIVED AT REASONABLE BELIEF OF ESCAPEMENT OF INCOME ON THE BASIS OF INFORMATION AVAILABLE WITH HIM WHICH LEADS TO A CON CLUSION THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSME NT, 5 ITA NO.3230/CHNY/2017 THEREFORE, THERE IS NO MERIT IN THE LEGAL GROUND T AKEN BY THE ASSESSEE. 5. AS REGARDS THE ADDITION MADE TOWARDS DIFFERENTIA L VALUE OF SALE CONSIDERATION BY INVOKING THE PROVISIONS OF SECTI ON 50C OF THE ACT, THE LEARNED CIT(A) OBSERVED THAT ALTHOUGH THE ASSES SEE HAS CLAIMED THAT ASSESSING OFFICER IN VIOLATION OF S ECTION 50C(2) OF THE ACT HAS PROCEEDED TO COMPUTE THE VALUE OF SALE CO NSIDERATION AS PER SECTION 50C(1) OF THE ACT, BUT THE FACT REMAINS THAT A CAREFUL READING OF SECTION 50C(2) OF THE ACT WOULD HIGHLIG HT THE CONDITIONS ON WHICH THE ASSESSING OFFICER IS MANDATED TO REFE R THE MATTER TO THE VALUATION OFFICER. SINCE THE ASSESSEE HAS FA ILED TO MAKE OUT A CASE WHICH FALLS UNDER THE PROVISIONS OF SECTION 50C(2) OF THE ACT, THE ACTION OF THE ASSESSING OFFICER IN COMPLETING THE ASSESSMENT WITHOUT REFERRING TO VALUATION OFFICER IS IN ACCO RDANCE WITH LAW. ACCORDINGLY, THERE IS NO ERROR IN THE FINDINGS RE CORDED BY THE ASSESSING OFFICER TO RECOMPUTE THE LONG TERM CAPIT AL GAIN BY TAKING INTO ACCOUNT FULL VALUE OF SALE CONSIDERATION AS M ANDATED UNDER THE PROVISIONS OF SECTION 50C OF THE ACT. AGGRIEVED BY THE LEARNED CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 6 ITA NO.3230/CHNY/2017 6. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT LEARNED CIT(A) OUGHT TO HAVE HELD THAT ASSESSING OFFICER HAS EXCEEDED HIS JURISDICTION U/S.147 OF THE ACT AND THEREFORE, NOTI CE U/S.148 ISSUED WAS NOT VALID, CONSEQUENTLY, THE ASSESSMENT PROCEED INGS BECAME NULL AND VOID. THE AR FURTHER SUBMITTED THAT LEA RNED CIT(A) OUGHT TO HAVE HELD THAT ASSESSING OFFICER COULD NOT HA VE MADE ASSESSMENT BASED ON THE PROVISIONS OF SECTION 50C OF THE ACT, WITHOUT MAKING REFERENCE TO THE VALUATION OFFICER, AS CONTEMPLATED UNDER SECTION 50C(2) OF THE ACT, FOR SUCH REFERENC E, INSPITE OF THE REQUEST OF THE ASSESSEE. 7. THE LEARNED DR, ON THE OTHER HAND, SUPPORTING T HE ORDER OF THE LEARNED CIT(A) SUBMITTED THAT THE ASSESSING OFFIC ER HAS REOPENED THE ASSESSMENT ON VALID GROUNDS, WHICH IS BASED ON THE REASONS RECORDED, AS PER WHICH INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT. SHE FURTHER SUBMITTED THAT A T THE TIME OF INITIATION OF PROCEEDINGS U/S.147 OF THE ACT, ASSE SSING OFFICER NEED NOT PROVE ESCAPEMENT OF INCOME, BUT WHAT IS RE QUIRED TO BE SEEN IS WHETHER MATERIALS IN THE POSSESSION OF THE A SSESSING OFFICER, PRIMA-FACIE SUGGESTED ESCAPEMENT OF INCOME OR NOT . IN THIS CASE, BASED ON MATERIAL AVAILABLE ON RECORD, THE ASSESS ING OFFICER HAS 7 ITA NO.3230/CHNY/2017 ARRIVED AT REASONABLE BELIEF OF ESCAPEMENT OF I NCOME AND HENCE, THERE IS NO MERIT IN THE ARGUMENTS TAKEN BY THE LE ARNED COUNSEL FOR THE ASSESSEE CHALLENGING THE VALIDITY OF REASSESS MENT. AS REGARDS, COMPUTATION OF LONG TERM CAPITAL GAIN BY T AKING FULL VALUE OF CONSIDERATION AS MANDATED U/S.50C OF THE ACT, THE A UTHORITIES BELOW HAVE BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT THERE IS CLEAR DIFFERENCE IN SALE CONSIDERATION RECORDED IN REGI STERED SALE DEED AND VALUE ADOPTED BY STAMP DUTY AUTHORITIES AND H ENCE, AS REQUIRED U/S.50C(1) OF THE ACT, THE ASSESSING OFFI CER HAS TO CONSIDER FULL VALUE CONSIDERATION AS PER STAMP DUT Y VALUE AND ACCORDINGLY, THERE IS NO ERROR IN THE FINDINGS REC ORDED BY THE ASSESSING OFFICER TO RECOMPUTE LONG TERM CAPITAL G AINS FROM SALE OF PROPERTY. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIE S BELOW. AS REGARDS THE LEGAL ISSUE TAKEN BY THE ASSESSEE CHAL LENGING VALIDITY OF NOTICE U/S.148 OF THE ACT IN LIGHT OF REQUIREMEN TS OF SECTION 151(2), WE FIND THAT ALTHOUGH, THE LEARNED CIT(A) H AS STATED IN PARA 5 OF HIS ORDER THAT NECESSARY SANCTION AS ENVISA GED U/S.151(2) OF THE ACT WAS TAKEN FROM THE COMPETENT AUTHORITY, BU T HE HAS NEITHER 8 ITA NO.3230/CHNY/2017 BROUGHT ON RECORD ANY EVIDENCE AVAILABLE IN THE ASSESSMENT RECORDS IN SUPPORT OF HIS CLAIM NOR STATED THE D ATE ON WHICH THE COMPETENT AUTHORITY, IF HE HAD GRANTED THE APPROV AL AND RECORDED HIS SATISFACTION IN ACCORDANCE WITH THE REQUIREMENT OF SECTION 151(2) OF THE ACT. IN THE ABSENCE OF ANY CLEAR FIN DINGS FROM THE LEARNED CIT(A) ALONG WITH DATE OF APPROVAL, IF ANY , AS REQUIRED U/S 151(2) OF THE ACT, IT IS VERY DIFFICULT TO CONCUR W ITH THE FINDINGS RECORDED BY THE LEARNED CIT(A) THAT REQUIREMENT OF SECTION 151(2) OF THE ACT HAS BEEN COMPLIED WITH BEFORE ISSUE OF NOTICE. WE FURTHER NOTED THAT HONBLE DELHI HIGH COURT IN THE CASE OF M/S.N.C CABLES LTD. REPORTED IN (391 ITR 11) HAD CLEARLY H ELD THAT AUTHORITIES SHOULD HAVE CLEARLY RECORDED THE FAC T WITH REGARD TO REQUIREMENT OF SECTION 151(2), WHEN THE ASSESSEE HA S SPECIFICALLY QUESTIONED THE SAID REQUIREMENT WHEN THE NOTICE ISSUED U/S.148 IS SILENT ON THIS ASPECT. IN THIS CASE, NEITHER NOTICE ISSUED U/S.148 SPECIFIES THE REQUIREMENT OF SECTION 151(2) OF THE ACT, NOR THE LEARNED CIT(A) HAS BROUGHT ON RECORD THE EVIDENC E AVAILABLE ON ASSESSMENT RECORDS. IN THE ABSENCE OF EVIDENCE, T HE FINDINGS OF THE LEARNED CIT(A) THAT NECESSARY SANCTION AS ENVI SAGED UNDER 151(2) OF THE ACT WAS TAKEN FROM THE COMPETENT AU THORITY IS 9 ITA NO.3230/CHNY/2017 PERVERSE AND NOT SUSTAINABLE IN LAW. THEREFORE, W E ARE OF THE CONSIDERED VIEW THAT NOTICE ISSUED U/S.148 OF THE ACT, WITHOUT COMPLYING THE REQUIREMENT OF SECTION 151(2) OF THE ACT IS BAD IN LAW AND LIABLE TO BE QUASHED. HENCE, WE QUASH THE R EASSESSMENT, NOTICE ISSUED U/S.148 OF THE ACT AND CONSEQUENTLY ASSESSMENT FRAMED UNDER SECTION 143(3) R.W.S 147 OF THE ACT DA TED 27.03.2015 IS ALSO QUASHED. 9. AS REGARDS THE ISSUE CHALLENGED ON MERITS, WE F IND THAT SINCE THE ASSESSEE DID SUCCEED IN LEGAL GROUND, CHALLE NGING VALIDITY OF NOTICE U/S.148 OF THE ACT, ISSUES CHALLENGED ON ME RITS BECOME INFRUCTUOUS AND HENCE THE SAME ARE NOT ADJUDICATED , AS IT BECOMES ACADEMIC IN NATURE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH NOVEMBER, 2020 SD/- SD/- ( ) ( . ) (MAHAVIR SINGH) (G.MANJUNATHA ) / VICE-PRESIDENT $ / ACCOUNTANT MEMBER & /CHENNAI, ' /DATED 10 TH NOVEMBER, 2020 DS )* +* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. , () /CIT(A) 4. , /CIT 5. * 1 /DR 6. /GF .