ASHISH TRIMBAK VAITY, MUMBAI V. ITO 23(2)(1), MUMBAI

ITA 4534/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0724 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 05-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH KUMAR YADAV
• Keywords: Sale consideration of property below Jantri Value; Fair market value; Reassessment proceedings
• Section: 50C; 148

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./4534/MUM/2015, / ASSESSMENT YEAR: 2010-11 SHRI ASHISH TRIMBAK VAITY B-304, AVINASH SANMARG V.B. PHADKE MARG, MULUND (E) MUMBAI-400 081. PAN:AENPV 3410 Q VS. INCOME TAX OFFICER-23(2)(1) MUMBAI. ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI DEVENDRA JAIN /ASSESSEE BY: SHRI RAJESH KUMAR YADAV / DATE OF HEARING: 24/04/2017 / DATE OF PRONOUNCEMENT: 17/05/2017 PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 11.05.2015 OF CIT(A)-40 MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL. ASSESSEE,AN INDIVIDUAL, FILED HIS R ETURN OF INCOME ON 28.06.2012 DECLARING TOTAL INCOME OF RS.19.81 LAKHS.ON THE BASIS OF INFO RMATION REGARDING SALE OF IMMOVABLE PROPERTY, THE MATTER WAS RE-OPENED U/S. 148 AND ASS ESSMENT WAS PASSED U/S.143(3) R.W.S. 147 OF THE ACT AT RS.2.67 CRORES. THE ASSESSEE HAS RAIS ED ISSUE OF JURISDICTION IN THE FIRST GROUND. IN THE OTHER GROUNDS MERITS OF THE CASES HAVE BEEN DISCUSSED. 2. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER(AO) NOTED THAT AS PER THE AIR- CIB INFORMATION THE ASSESSEE HAD SOLD AN IMMOVABLE PROPERTY ON 27/11/2009 AT RS.3.47 CRORES HAVING 1/3 RD SHARE ALONG WITH 2 OTHER CO-OWNERS, THAT THE PROPE RTY WAS ACQUIRED BY SUCCESSION AND INHERITANCE, THAT THE VALUATION AS O N 01.04.1989 AS PER THE REPORT OF THE VALUER ,DATED 18.11.2011,WAS RS.6.59 LAKHS.THE AO CALLED F OR DETAILS IN THAT REGARD. IN RESPONSE TO THAT THE ASSESSEE STATED THAT THERE WAS RESERVATIO N ON THE PROPERTY FOR A SCHOOL, THAT IT WAS DE- RESERVED, THAT THE PROPERTY WAS SOLD FOR RS.1.50 CR ORES, THAT RS.50.00 LAKHS WERE PAID TO M/S. M.DEEPAK AND CO. IN RESPECT OF LITIGATION EXPENSES, FEES AND OTHER CHARGES, THAT THE AMOUNT WAS PAID BY THE PURCHASER,THAT THE CO-OWNERS ACCEPT ED CONSIDERATION OF RS.1.00 CRORES ONLY, THAT THE AMOUNT WAS DIVIDED EQUALLY AMONG THE THREE CO-OWNERS, THAT IN THE RETURN THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN(LTCG) OF RS.19.44 LAKHS ON THE SALE CONSIDERA -TION OF RS.33.33 LAKHS AFTER DEDUCTING INDEXED COS T OF ACQUISITION OF RS.13.89 LAKHS, THAT SIMILAR LTCG WAS SHOWN BY THE OTHER TWO CO-OWNERS A LSO. 4534/M/15(10-11) ASHISH TRIMBAK VAITY 2 3. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,TH E AO HELD THAT THE CO-OWNERS HAD SHOWN CONSIDERATION OF RS.1.00 CRORES ONLY, THAT THE MARK ET VALUE OF THE PROPERTY AS PER THE PROVISIONS OF SECTION 50C OF THE ACT WAS RS.3.47CRO RES. FINALLY, HE ADDED AN AMOUNT OF RS. 2.47 CRORES (BEING THE DIFFERENCE BETWEEN STAMP DUT Y VALUATION AND TOTAL SALE CONSIDERATION) SHOWN BY THE THREE CO-OWNERS) TO THE TOTAL INCOME O F THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA) AND MADE DETAILED SUBMISS IONS ABOUT THE COMPUTATION OF LTCG. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,HE HELD THAT THE DISPUTED PROPERTY WAS CO-OWNED BY THREE PERSONS, TH E AO OF THE OTHER CO-OWNER HAD REFERRED THE MATTER TO VALUATION OFFICER FOR DETERMINING THE FAIR MARKET VALUE (FMV) AS ON 1.4.1981 AND 30.11.2009 FOR THE PURPOSE OF CAPITAL GAINS,TH AT THE DVO HAD VALUED THE PROPERTY AT RS.3.58 LAKHS AND RS.1.97CRORES AS ON 1.4.81 AND 30 .112009 RESPECTIVELY, THAT THE DVO HAD DULY CONSIDERED THE OBJECTIONS OF THE ASSESSEE WITH RESPECT TO PAYMENT OF LEGAL FEE AND CHARGES, THAT THE DVO HAD ALLOWED DEDUCTION OF 15% FOR RESTRICTED USE FOR SECONDARY SCHOOL RESERVATION; 10% FOR PROBLEM OF ACCESS ROADS, THAT OUT OF MARKET VALUE OF 3.94CR 50% HAD BEEN ALLOWED AS DEDUCTION ON ACCOUNT OF ENCUMBRANCE S/ENCROACHMENTS/LITIGATIONS, THAT ALL THE REASONS AND FACTORS BRINGING DOWN THE FMV OF THE PR OPERTY AND THE EXPENSES INCURRED BY THE ASSESSEE HAD BEEN FACTORED BY THE DVO, THAT ONLY 1/ 3 RD OF THE LTCG SHOULD BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE.ACCORDINGLY,HE DIRECTE D THE AO TO RESTRICT THE ADDITION TO RS.58.25 LAKHS. 5. DURING THE COURSE OF HEARING BEFORE US, THE AR STA TED THAT THE AO HAD NOT ISSUED NOTICE U/S. 143(2) OF THE ACT BEFORE COMPLETING THE ASSESS MENT U/S. 147 , THAT IT HAD RAISED THE ISSUE BEFORE THE FAA AND AO HAD FILED A REMAND REPORT ON 08.09.2014 IN THAT REGARD, THAT THE ASSESSEE HAD OFFERED HIS COMMENTS ON 31.10.2014 AND HAD RELIED UPON THE CASE OF HOTEL BLUE MOON(321ITR362); MALVIKA ARUN SOMAIYA(ITA NO.994 OF 2008) AND GENO PHARMACEUTICALS LTD.(214TAXMAN83) AND STATED THAT THE ASSESSMENT PA SSED BY THE AO WAS ILLEGAL.THE DR SUPPORTED THE ORDER OF THE FAA AND RELIED UPON THE CASE OF MADHYA BHARAT ENERGY CORPORATION LTD.(337 ITR389). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD, DURING THE ASSESSMENT PROCEEDINGS,RAI SED AN OBJECTION NON-ISSUE OF NOTICE U/S. 143(2) OF THE ACT,THAT THE FAA HAD CALLED FOR A REM AND REPORT FROM THE AO IN THAT REGARD, THAT THE ASSESSEE HAD MADE DETAILED SUBMISSION IN T HAT REGARD BEFORE THE FAA.WE FIND THAT 4534/M/15(10-11) ASHISH TRIMBAK VAITY 3 THE AO HAD NOT BROUGHT ON RECORDED ANY EVIDENCE ABO UT SERVICE OF NOTICE ISSUED BY HIM TO THE ASSESSEE U/S. 143(2) OF THE ACT. THE HONBLE JU RISDICTIONAL HIGH COURT HAS , IN THE CASE OF GENO PHARMACEUTICALS LTD. (SUPRA) HAS CLEARLY HELD THAT ISSUE OF NOTICE U/S.143(2) WAS MANDATORY AND IN THE ABSENCE OF SERVICE OF THE SAID NOTICE THE AO COULD NOT PROCEED TO MAKE INQUIRY ON THE RETURN FILED IN COMPLIANCE TO NOTICE ISSUE U/S 148.WE WOULD ALSO LIKE TO REFER TO THE CASE OF SILVER LINE WHEREINTHE HONBLE DELHI HI GH COURT(383ITR455)HAS HELD AS UNDER: THE PROPOSAL TO REOPEN AN ASSESSMENT UNDER SECTIO N 147 OF THE INCOME-TAX ACT, 1961, IS TO BE BASED ON REASONS TO BE RECORDED BY THE ASSESSING OFFICER. SUCH REASONS HAVE TO BE COMMUNICATED TO THE ASSESSEE. MERELY BECAUSE THE AS SESSEE PARTICIPATES IN THE PROCEEDINGS PURSUANT TO SUCH NOTICE UNDER SECTION 148 OF THE AC T, IT DOES NOT OBVIATE THE MANDATORY REQUIREMENT OF THE ASSESSING OFFICER HAVING TO ISSU E TO THE ASSESSEE A NOTICE UNDER SECTION 143(2) OF THE ACT BEFORE FINALISING THE ORDER OF RE ASSESSMENT. A REASSESSMENT ORDER CANNOT BE PASSED WITHOUT COMPLIANCE WITH THE MANDATORY REQUIR EMENT OF NOTICE BEING ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE UNDER SECTION 143 (2) .THE REQUIREMENT OF ISSUANCE OF SUCH NOTICE IS A JURISDICTIONAL ONE. IT DOES GO TO THE R OOT OF THE MATTER AS FAR AS THE VALIDITY OF THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 / 148 OF THE ACT IS CONCERNED. SECTION 292BB WAS INSERTED IN THE INCOME-TAX ACT, W ITH EFFECT FROM APRIL 1, 2008. IT TALKS OF THE DRAWING OF A PRESUMPTION OF SERVICE OF NOTICE O N AN ASSESSEE AND IS BASICALLY A RULE OF EVIDENCE. IT INTRODUCES A FICTION THAT ONCE THE ASS ESSEE APPEARS IN ANY PROCEEDING OR HAS CO- OPERATED IN ANY ENQUIRY RELATING TO ASSESSMENT OR R EASSESSMENT IT SHALL BE DEEMED THAT ANY NOTICE UNDER ANY PROVISION OF THE ACT THAT IS REQUI RED TO BE SERVED HAS BEEN DULY SERVED UPON HIM IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AN D THE ASSESSEE IN THOSE CIRCUMSTANCES WOULD BE PRECLUDED FROM OBJECTING THAT A NOTICE THA T WAS REQUIRED TO BE SERVED UPON HIM UNDER THE ACT WAS NOT SERVED UPON HIM OR NOT SERVED IN TIME OR WAS SERVED IN AN IMPROPER MANNER. THE FAILURE OF THE ASSESSING OFFICER, IN RE ASSESSMENT PROCEEDINGS, TO ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT, PRIOR TO FINALISIN G THE REASSESSMENT ORDER, CANNOT BE CONDONED BY REFERRING TO SECTION 292BB OF THE ACT. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS,WE HOLD THAT ASSESSMENT ORDER PASSED BY AO, WITHOUT ISSUING AND SERVING THE NOTICE U/S. 143(2) OF THE ACT UPON THE ASSESSEE,WAS NOT VALID. THEREFORE,WE DECIDE JURISDICTIONAL ISSUE IN FAVOUR OF THE ASSESSEE. AS WE HAVE HELD THE ORDER OF THE AO INVALID, SO, WE ARE NOT ADJUDICATING THE OTHER ISSUES. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2017. 17 , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 17. 05 . .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 4534/M/15(10-11) ASHISH TRIMBAK VAITY 4 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.